We have maintained our long-term Neutral recommendation on
) with a target price of $43.00, following the company's
fourth-quarter fiscal 2012 results.
Why the Reiteration?
Macy's is one such company that has performed fairly well
during 2012. The company has been taking prudent steps to augment
sales, profitability and cash flows. These include integration of
operations, consolidation of divisions and customer-centric
localization initiatives. To help drive traffic, Macy's continues
to focus on price optimization, inventory management and
These measures facilitate the company to deliver
better-than-expected results, which is evident from the fact that
Macy's has beaten the Zacks Consensus Estimates for 11 straight
quarters by an average of 38.5%.
During the recently concluded quarter, Macy's posted quarterly
earnings of $2.05 per share that surpassed the Zacks Consensus
Estimate of $1.98, and surged 20.6% from $1.70 earned in the
Moreover, total sales grew 7.2% year over year to $9,350
million and came ahead of the Zacks Consensus Estimate of $9,327
million. Comparable-store sales for the quarter climbed 3.9%.
Going forward, Macy's projects fiscal 2013 earnings between
$3.90 and $3.95. Moreover, comparable-store sales are expected to
grow by 3.5%.
Given the company's strong performance and healthy guidance,
we maintain a Zacks Rank #2 (Buy) on this stock in the near term.
However, in the long run, sluggish economic recovery and erratic
consumer behavior still remain causes of concern.
Moreover, increased competition and the company's high
debt-to-capitalization ratio may limit the upside potential of
Other Stocks to Consider
Besides Macy's, other stocks worth considering in the non-food
retail, wholesale sector include
, which holds a Zacks Rank #1 (Strong Buy) and is expected to
continue with its upbeat performance. Other stocks that should be
Ralph Lauren Corporation
), both of which carry a Zacks Rank #2 (Buy).
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